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May 21, 2017May 21, 2017

YEMEN Economic Reform “The Current situation and other Facts”

Yemen is a strategically important country in the Arabian Peninsula, also they have the Mandab Strait which is one of the main trade channel for MENA REGION, also YEMEN has great economic potential with its large labor force, long shoreline, and agricultural and hydrocarbon resources.

I choose YEMEN in this report because, the country is one of the poorest and most fragile countries in the world. Poverty, and unemployment are widespread, and water resources are very scarce.

In this paper I will focuses on YEMEN Economic Reform, challenges, main donors role the recommendations in agenda implementation.

Economic Reform

YEMEN should move forward to next stage of transition, after 2011 popular revelation and political crisis Yemeni citizens haven’t live the experience of any improvement in their standard of living, current government tend to address not only the demand of political reform, but also take into consideration the Economic Reform strategically and precisely in both short and long term.

Making progress on the economic reform as a priority will avoid the democratic transition process risks and complete loss of credibility of current government, which could result in renewed conflict and shift from fragile to failed county. Furthermore Yemen one of the poorest country in the region with a per capita GDP of $1,500, also more than 54% of the population under the poverty line, with unskilled young and low productivity labor force. Focusing in Economic improvement is crucial because most of the current problems can be traced and back to weak state institutions and poor economic management.

Limitation of Economic reform

After 2011 popular revolution expectation was high, but YEMEN kept struggling from many challenges, starting with the structure problems of monopoly using of power, and Houthi war, furthermore Patronage and corruption, the burdens of high population growth, water scarcity and weak infrastructure, poverty combined with a poorly skilled labor force and high unemployment rate.

Facts and Challenges

Economic activity contracted by 11 percent in 2011, with unemployment estimated to have doubled from the 2010 rate of 14.6 percent.

Unemployment among young people is greater still, estimated at 60 percent.

Food and consumer prices have also risen steeply, and official price data show an upsurge in annual inflation to 23 percent at the end of 2011.

10 million Yemenis, just under half the population, are food insecure.

Nearly one million children under age five are acutely malnourished.

Role of donor support

The 2012 Friends of Yemen meeting in New York. Photo credit: UK Foreign and Commonwealth Office

International donor Support YEMENI Government by 4.7 billion US Dollar, but only a portion of the promised funds have been disbursed. More recently, the donor community has revived its activities through the “Friends of Yemen,” an international group formed to drive economic reform in the country. The process started with a high-level meeting in that recognized the magnitude of the challenges that Yemen is facing and the need to react quickly. On other hand Yemeni government and international donor bodies have put a considerable amount of effort into drafting action plans, frameworks, strategies, project documents and legislation.

From 1990 to 2004 the GCC countries Fund, provided over US$1 billion in aid to Yemen, compared to US$250 million provided by the EU for the same period.

This is despite a period of several years when aid was drastically cut because of Yemen’s refusal to support the first Gulf War. At the 2006 London donors’ conference co-convened by the GCC, Gulf donors pledged US$2.5 billion, more than half of the total US$4.7 billion pledged by all international donors.

US$10.6 billion in aid to support Yemen’s transition. But how much of it has actually been delivered?

Only 38% has been handed over, most as direct budget support, namely grants for fuel and a soft loan from Saudi Arabia

Invest large amount and effort in infrastructures rather than invest in human capital.

High level of corruption and low level of transparency.

Yemen now

If we can rely upon the indicators from the international development agencies, YEMENI Economic performance is still weak, GDP per capita has actually declined between 2010 and 2014 from formerly $4,442.50 to $3,959.30, and inflation rate seems under control, Income from oil export is on the decline due to maturing of oil fields, sabotage and falling oil prices, however Foreign direct investment is shrinking, even reaching negative levels in 2013 (-0.4% of GDP) and unemployment rate about 25%, In contrast number of private education institutions is on the rise and more fund invest in infrastructures, other main steps taken is in 2014, when government and the private sector signed a formal memorandum of understanding to initiate public and private dialogue mechanisms to enhance and identified the obstacles that need to be dealt with to improve the business and investment climate and create sustainable economic growth in cooperation with the private sector.

Recommendations

YEMENI Economic Reform can be achieved by main steps movement, which economic diversification, reduction of fuel subsidies, investment in infrastructure and basic service delivery, creating a better operating environment for businesses, and expanding access to financial services and improvement of the business climate.

Finally Yemeni government and its international development donors must make it a priority to agree on a well-defined time-frame for the development and implementation of projects and disbursement of donor funds by adopting clear strategies and implement good governance practices on all level These sample achievements and huge amount of aids (funds) show that the challenges facing Yemen are not impossible to address by innovative approaches and implementation, a true support from the international development donors specially GCC, Yemen can overcome these challenges and restore social and economic stability also by restoring quickly basic education and health services as well as resuming the operations of programs benefiting the poor would be important for building government confidence and trust.